Supreme Court Quashes Insolvency Ruling Over AI-Generated Fake Precedents

The Supreme Court of India has set aside judgments from the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) in an insolvency case involving Essel Infraprojects Ltd, after finding that the tribunals had relied on fake and nonexistent legal precedents generated by artificial intelligence. In a landmark ruling on July 2, 2026, the court declared a zero-tolerance policy for the use of such fabricated material in legal proceedings.

The case originated from insolvency proceedings initiated by Jammu and Kashmir Bank against Essel Infraprojects, which had acted as a corporate guarantor for loans. The NCLT's Mumbai bench admitted the insolvency plea on August 28, 2024, and the NCLAT upheld that order on September 11, 2025. However, the Supreme Court found that several precedents cited by the NCLT to justify its decision did not exist. These included fabricated case names and paragraphs wrongly attributed to genuine Supreme Court judgments.

A bench comprising Justices Pamidighantam Sri Narasimha and Alok Aradhe described the use of such hallucinated material as "like the release of methyl isocyanate in the province of law and justice,...